There was quite a price correction for almost all North American softwood lumber and panel commodities last week, as the producer advantage through most of this year evaporated and a more normal seasonal supply-demand balance was restored. While customers were still interested in buying wood, generally their inventory needs for remaining 2018 construction projects have been met. Sellers had difficulty booking orders, even at these much-reduced prices.
Since most customers are well-stocked and not feeling pressure to buy, many decided to continue waiting on the sidelines to see if these freshly-dropped prices will fall any further.
Lumber supplies were ample both at sawmills and with secondaries.
The below table is a comparison of June 2018 and September 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05:
Current Softwood Lumber Prices Compared to Recent and Historical Highs: Sept 25, 2018
Despite some quite wild volatility for most of 2018, this year the old adage for seasonal lumber price cycle seems to be accurate: Labour Day is the beginning of the end (for North America construction activity), and US Thanksgiving is the end of the end. Unless there is a very mild autumn, historically lumber purchasing drops significantly around Labour Day, and continues falling to US Thanksgiving. With prices generally following suit.
Sawmills like to empty out their lumber yards for the end of the year, with plans to start up production again in full swing as January commences. Demand right to the end of 2017 remained unabated, so there was not really the usual seasonal drop in prices through 4Q last year. The latest softwood lumber duties, which came on in 1Q and 2Q 2018, were implemented at a time of quite robust demand. Also, severe and ongoing logistical constraints — especially on the Canadian railways — left customers waiting extremely long periods to receive their wood already ordered. These transportation problems kept inquiry and buying high, as end-users did not know if they were going to get their long-awaited or just-ordered loads of lumber first.
Those logistical and supply chain constraints have been worked out and players report wood moving smoothly and quickly throughout Canada and the US.
Sawmill order files at most producers remain at less than one week.